The metropolitan region of São Paulo is a giant agglomeration
consisting of 39 municipalities which together contain some 17
million people (figure 10.1). It is an economic powerhouse which
contributes around 30 per cent of Brazil's gross national
product. São Paulo's 2.1 million manufacturing workers make it
the second largest industrial city in the world. They represent
around one third of the active population, a much higher
proportion than that in any other large Brazilian city.1

Since the introduction of the motor car, urban expansion in
São Paulo has followed a radial model. The radius of the
built-up area did not exceed one kilometre until 1870; today,
continuous urban development spreads 80 kilometres from east to
west and 40 kilometres from north to south. Since 1980, the
built-up area has been growing far more rapidly than the
population (table 10.1). The city's land-use pattern has been
strongly influenced by land speculation, which since the end of
the last century, has ensured that the built-up area has
expanded, leaving large areas of undeveloped space. This process
has increased the price of serviced land and has helped
accentuate social segregation.

São Paulo began to grow rapidly during the last quarter of
the nineteenth century. It developed on the basis of coffee
production and the "Europeanization" of the urban
hinterland. Modernization transformed the productive structure,
the transport and communications systems, and the consumption
structure of the region, changes reflected in the city's built
environment. São Paulo and its region responded to every shift
in material culture in the metropolitan countries, eagerly
adopting every new innovation. Indeed, for a century, the
adoption of one new invention after another was the basis of São
Paulo's virtually uninterrupted economic growth. The process of
modernization firmly entwined the fortunes of the city with those
of its state.

Until the 1960s, Brazil lacked adequate modern transportation
and there was no national market. São Paulo supplied the south
and south-east, the only region of the country with a
well-developed system of ports, railways, and roads. When the
Brazilian "miracle," the construction of Brasilia, and
the opening of new roads into Amazonia finally unified the
country, the São Paulo region benefited enormously. It became
the undisputed economic centre of Brazil. Not only did its
manufacturing and commercial activities thrive but it also
developed into the country's main financial centre. Until 1960,
finance had been mainly controlled from Rio de Janeiro, the
headquarters of major public financial institutions such as the
Central Bank and the National Bank for Economic Development. The
transfer of these functions to Brasilia and the integration of
Brazil into a single market gave São Paulo the opportunity it
needed to take over.

Between 1968 and 1984, São Paulo banks increased their share
of the country's total bank deposits from 26 per cent to 42 per
cent (Cordeiro, 1988: 158). By 1985, 33 per cent of Brazilian
banks had their headquarters in the city. Many important banks
moved their main offices from Rio de Janeiro to São Paulo; by
1989, 18 of the 23 foreign banks operating in Brazil had their
principal Brazilian offices in the city, only five in Rio de
Janeiro (Cordeiro, 1990). The growing financial clout of the city
attracted other economic activities; for example, the
headquarters of the FIAT holding company was located in São
Paulo in 1990.

If Rio de Janeiro still maintains its superiority in the
cultural world, with a major television complex and almost all
cinema production, São Paulo increasingly controls the country's
advertising business. In the early 1980s, its advertising
billings were already higher than those of Rio, and by 1985 São
Paulo companies controlled two-thirds of the billings. Today,
São Paulo contains 60 per cent of the major agencies and nine of
the eleven agencies with more than 250 employees. It is also now
the country's major intellectual centre, with the largest
university and research complex in Brazil and with a substantial
proportion of the major scientific publishers.

Today, São Paulo is not only Brazil's dominant economic
centre but has established itself as a major world city. In the
process, it has begun to change its form. Without losing its
industrial importance, it has become a centre of services and the
indisputable hub of commercial decision-making. As industrial
employment has begun to move out to nearby cities, São Paulo has
been transforming itself into an informational complex. This is
reflected in the growth of technical, scientific, and artistic
employment in the city. From 205,000 workers in 1971, the total
rose to 460,000 in 1981 and 760,000 in 1990 (National Household
Survey, 1971, 1981, and 1990). Whereas the city's total workforce
increased by 119 per cent between 1971 and 1990, the labour force
in informational activities increased by 271 per cent; this
sector's share of total employment expanded from 6.3 per cent to
10.4 per cent during the same period.

In the process, São Paulo's share of Brazil's gross national
product has declined from 25 per cent in 1970 to 20 per cent in
1987. This decline is the result of its loss of manufacturing
activity, which fell from 44 per cent in 1970 to 31 per cent in
1987 (table 10.2). Although total manufacturing employment has
not actually fallen, employment in other parts of the State of
São Paulo has been growing much more quickly (see next section).

Table 10.2 Distribution of manufacturing industry in State
of São Paulo, 1970-1987

São Paulo is now what Cordeiro (1988: 153) calls a
"transitional metropolis," something completely
different from an industrial city. Its functions and importance
are no longer reflected in the mere flow of material goods, it
now organizes those flows through its decision-making power and
its control over information. São Paulo is therefore passing
through its third phase of globalization. The first, based on
commerce, began in the late nineteenth century and continued
until the 1930s; the second, based on manufacturing, began in the
1930s and ended in the 1960s.

During the 1980s, Brazil experienced an economic crisis. This
crisis hit the large cities very hard but not all of the
secondary cities. In the State of São Paulo, the smaller cities
grew while the capital declined. This had a marked impact in
terms of the spatial distribution of the state's gross internal
product: in 1980 the São Paulo Metropolitan Area (SPMA)
contributed 60 per cent of the state's income, while eight years
later its share had fallen to 41 per cent (EMPLASA, 1980 and
1988).

Shifts in the location of industry were an important
ingredient in this trend (table 10.2). Between 1980 and 1989,
industrial employment grew by only 3 per cent in Greater São
Paulo and by 18 per cent outside (Fundação SEADE/Governo do
Estado de São Paulo, 1992: 103). Whereas value added in cities
with less than 50,000 inhabitants grew by 2 per cent between 1980
and 1988, value added fell by 2 per cent in those with between
50,000 and 250,000 people, 11 per cent in those between 250,000
and one million, and 21 per cent in cities with over a million (O
Estado de São Paulo, 28 January 1990). Average productivity and
profitability were both lower in São Paulo than in many smaller
cities (Azzoni, 1988). In 1980, profitability

(measured in terms of value added minus labour costs) was
higher in Baurú, Campinas, Vale do Paraíba, São Jose dos
Campos, Taubaté, and Ribeirão Preto than in Greater São Paulo.
Since value added per worker was much higher in the smaller
cities, Greater São Paulo's share of industrial employment fell
less rapidly. Between 1980 and 1988, the number of industrial
workers in Greater São Paulo fell from 64 per cent to 62 per
cent of the total workforce (Folha de São Paulo, 27 November
1989).

The locational shift from Greater São Paulo was not confined
to industrial activity. Whereas total employment in the
metropolitan area increased by 13 per cent between 1980 and 1989,
in the interior it grew by 19 per cent. The numbers of public
workers grew by 27 per cent in the metropolitan area and by 73
per cent outside it (Fundação SEADE/Governo de Estado do São
Paulo, 1992: 103). Only employment in financial services and the
communications sector continued to grow more rapidly in the
state's major city (Dedecca and Montagner, 1992).

The changes in location were all part of the transformation of
space and society in the State of São Paulo. Modernization and a
shift to a more technically and scientifically based economy had
both encouraged this change.

Thanks to industrial deconcentration, rising public-sector
employment, the modernization of agriculture, and the
introduction of the Development Programme for Intermediate
Cities, the quality of life improved markedly in the interior of
the state. Rates of infant mortality fell, more and more
households were linked to the water and electricity networks, and
the provision of hospital beds in smaller cities improved.

Indeed, by the 1980s, several indicators showed that the
quality of life in the metropolitan area was worse than in the
intermediate cities. In 1985, life expectancy was one year lower
in Greater São Paulo and there was a vast difference in infant
mortality rates: 31 babies out of every thousand died in the
intermediate cities compared to 54 in the metropolitan area
(Carvalho Ferreira, 1989). Literacy rates also showed marked
differences; whereas 16 per cent could not read or write in the
intermediate cities in 1982, the proportion in Greater São Paulo
was 20 per cent.

The empirical evidence suggests that a process of
"metropolitan involution" was operating. So many poor
people moved to São Paulo that the city could not provide for
them. The labour market became segmented between highly skilled
and well-paid jobs and large numbers of unskilled and poorly
remunerated activities. This was not a process of "urban
ruralization," because recent migrants from the countryside
did not cling on to their rural values and in any case many of
the poor migrants came from urban areas. It was a sign that
so-called urban civilization was extending its tentacles
throughout Brazilian society; the problem was that the great
economic metropolis could not cope.

In the late 1960s and throughout the 1970s, São Paulo
benefited from the rapid expansion of the Brazilian economy. The
city became enormously richer and the size of its middle class
increased dramatically. At the same time, poverty and the numbers
of people living in poverty worsened. In 1990, São Paulo
contained 10 per cent of Brazil's population and 11 per cent of
its labour force, but also 20 per cent of persons earning more
than 10 times the minimum salary. But, although it had a higher
proportion of high-income people than any other Brazilian city -
48,000 families were earning more than US$100,000 per annum -
vast numbers earned very little. Indeed, in 1990, 850,000 people
earned less than the minimum wage. Unfortunately, the living
conditions of the very poor have not been improving. Rather, the
1980s and early 1990s saw a deterioration in conditions in the
metropolitan area: employment, housing, transport, education,
health, and crime all got worse.

Employment and unemployment

Trends in employment and unemployment in Greater São Paulo
between 1985 and 1993 reflect those in Brazil as a whole (table
10.3). After the difficulties of the early 1980s, rates of
unemployment had fallen by the end of the decade, only to rise
rapidly during the 1990s. By 1992, there were more than 1.2
million unemployed people in the city, 16 per cent of the
economically active population. In addition, there were strong
signs of a growth in casual forms of employment. The proportion
of the labour force that was self-employed rose from 16 per cent
in 1986 to 21 per cent in 1993. The proportion that was working
without a work permit (carteira assinada) rose from a minimum of
19 per cent in 1989 to 23 per cent in January 1993 (Fundação
SEADE, 1991 and 1993). The employment situation in Greater São
Paulo has undoubtedly deteriorated.

The unemployment problem is far worse in the periphery than in
the municipality of São Paulo. The city's Blacks are also much
more likely to be unemployed than other heads of household
(Fundação SEADE, 1991 and 1993). Similarly, there are large
numbers of young people engaged in casual forms of employment; in
1985, one in three workers under 18 years of age was employed
without a work certificate. Nevertheless, it is not only the poor
who are suffering; employment difficulties are also affecting
skilled workers. For example, unemployment among workers with
previous salaried work experience rose from 10 per cent in 1988
to 16 per cent in 1993 (Fundação SEADE, 1991).

Housing conditions

The housing situation is a visual reflection of what is
happening in the rest of São Paulo society. Recent estimates
refer to a housing deficit of more than one million units in a
metropolitan area with 3.9 million homes. Ten thousand people
live on the streets. In 1992, two-thirds of all homes fell into
some category of low-quality shelter (favela houses built
of flimsy materials, households living in overcrowded conditions,
etc.). In 1991, 28 per cent of homes lacked a connection to the
water system, and 50 per cent were not linked to the sewerage
system (figure 10.2).

Around 70 per cent of all homes have been built through
self-help methods and the proportion rises to 90 per cent in some
peripheral municipalities (Santos, 1990: 43). A significant
number of these homes offer their inhabitants very poor shelter.
The proliferation of favelas is a comparatively new
phenomenon in São Paulo: in 1973, there were only 73,000
favelados, today there are 1.1 million. In 1991, 11.3 percent of
the population lived in this form of housing, compared to only
1.1 per cent in 1973 (Veras and Taschner, 1992). There are now
1,600 favelas in the city, the largest, Héliopolis,
accommodating some 50,000 people.

The pressure on some people to build their own home has led to
a considerable shift in the tenure structure of the city. Whereas
41 per cent of families rented homes in 1972, the figure in 1990
was only 28 per cent. Nevertheless, the cortiços still represent
a principal form of shelter available to the poor. Even if the
proportion of families living in rental accommodation is in
decline, the absolute numbers of tenants has been increasing
rapidly, from 125,000 people in 1975 to 500,000 in 1982 and three
million today. Many of the 88,000 cortiços in existence in 1987
were in a very bad state of repair (Pinheiro, 1992). In a survey
in the municipality of São Paulo in 1986, only 19 per cent of
homes had their own kitchen and fewer than 6 per cent their own
tap. In four-fifths of the cortiços surveyed, an average of 2.6
people lived in every room, the rooms varying in size from 8 to
15 square metres.

The growth of rental accommodation in the central areas is due
to the deteriorating employment situation and the growing
importance of casual forms of work. Since the central areas
contain the best locations for casual work and the real cost of
transportation has been rising rapidly, many families have been
forced into this kind of accommodation.

Transportation

Transportation is another serious problem in São Paulo. Its
quality is poor, its services are not expanding sufficiently
rapidly, and fares are rising faster than the incomes of the
poor. One consequence is that the number of journeys per person
has been diminishing over time. In 1987, every inhabitant made
1.15 journeys per day compared to 1.53 ten years earlier. The
change has affected passengers whatever their income. Using
education as an income indicator, the average daily journeys made
by those with university education fell from 3.26 in 1977 to 2.81
in 1987; for those with primary education the average fell from
0.86 to 0.58. The greater percentage fall in average journeys for
the latter group is symptomatic of the deterioration in public
transport facilities. Indeed, the numbers of journeys on public
transport diminished slightly between 1987 and 1991 despite the
rise in the metropolitan region's total population. In the
municipality of São

Paulo, the number of bus journeys fell by 4 per cent between
1992 and 1993, the number of buses in operation by 12 per cent.

Various efforts have been made in recent years to improve the
service and the current municipal administration is planning to
privatize public transport services in the next two years. The
municipality will remain in charge of overall coordination and
technological development.

Health

The quality of health care in the city is also deteriorating.
Although the number of doctors has been increasing, the urban
population has been growing faster. This does not just represent
a failure to keep up with population increase, for the numbers of
hospital beds and of hospital ancillary staff fell absolutely
between 1977 and 1987 (Santos, 1992: 33). Hospital-bed occupancy
rates have fallen to only 73 per cent, and many hospitals have
been closing wards. No doubt the occupancy problem is accentuated
by the distribution of hospital facilities: two-thirds of all
hospitals are located in the central areas and 40 of the 54
public hospitals are found in middle-class neighbourhoods
(Fundação SEADE, 1993).

Education

The educational system is also in dire straits. In the lower
grades, the number of students is growing so quickly that the
system cannot cope. Matriculation into primary schools rose
annually by 3.5 per cent in eleven years after 1980; a total of
3.1 million children registered in 1991 (Fundação SEADE, 1993).
At the primary level, the number of private pupils is expanding
fast, although at present that is not true of secondary
education. The problems of secondary education are perhaps best
reflected in the fact that 11 per cent of 17-yearolds are neither
in work nor in education.

Pollution

Water pollution is getting worse despite official efforts to
protect the city's water sources. Recent legislation, intended to
limit urban growth in the areas near the reservoirs, has failed
(figure 10.3). Indeed, a significant share of urban expansion has
occurred precisely in those areas, invasion settlements and
illegal subdivisions having occupied large areas of protected
land. Rising levels of pollution in the reservoirs have posed
major problems for the Environmental Technology and Sanitation
Company (CETESB).

At least, some success has been achieved against the major air
polluters, CETESB having convinced the 162 major polluters
(responsible for 96 per cent of particulate emissions) to follow
their recommended procedures. Even so, recommended air pollution
levels are being exceeded in terms of suspended dust and smoke
levels. Prescribed maxima for levels of ozone, carbon monoxide,
and sulphur dioxide are also regularly exceeded and CETESB has
been forced to introduce special measures during the winter, when
the effects of temperature inversions are at their worst. The
city's 4.5 million cars are a particular problem with respect to
air pollution, especially in the central areas.

Crime

There has been a sharp and worrying rise in the crime rate.
Recorded crimes against the person increased annually by 7 per
cent over a twenty-year period, from 41,000 in 1973 to 162,000 in
1991. Property crime rose even more quickly, with an annual
increase of 9.3 per cent during the same period (Pastore et al.,
1991: 69; (Fundação SEADE/ Estado de São Paulo, 1992).2 Crime
has been increasing in all parts of the city but especially in
the central area. The likely causes are rising unemployment,
increasing levels of drug use, deterioration in family values,
and the rising numbers of children living in the street (often
themselves the victims of crimes of violence). The perpetrators
of crime are certainly not confined to the lower ranks of
society: during the last three years between 5 and 10 per cent of
recorded criminals came from the middle class. The police
themselves are also committing more crimes: deaths at the hands
of the police rose from 165 in 1983 to 1,350 in 1992 (Pinheiro,
1991: 95; Folha de São Paulo, 31 May 1993).

As the problems of the metropolis are increasing, the local
authorities are facing greater problems in confronting them. In
1974, the federal government created new administrative agencies
for the country's nine metropolitan areas. It was hoped that
these new agencies would be much less bureaucratic than the
existing local government structures. The new agency for São
Paulo, EMPLASA (the Metropolitan Agency for Greater São Paulo),
was effective but it took over responsibility only for
transportation and for management of the region's water
resources. This left the municipalities to address all the other
serious problems, with only limited help from the state and
federal governments.

The 39 municipalities which make up the metropolitan region
receive half of their revenues from higher levels of government
(in 1990, 5.6 per cent from the federal government and 45.1 per
cent from the state government) and generate the rest themselves.
The municipal financial situation has deteriorated recently,
owing to the economic recession and the increasing numbers of
under- and unemployed workers. The federal government transfers
part of its income tax and industrial value-added taxes into a
Participation Fund. This fund, which accounts for 17 per cent of
federal revenues, is divided between the municipalities on a per
capita basis. The smaller municipalities gain most of their
revenues from this source; larger authorities are better able to
supplement this source of income from their own tax base. The
State of São Paulo transfers funds to the municipalities from
its taxes on commerce, services, and vehicle ownership. The
municipalities' own revenues are derived from taxes on land and
property, property transactions, sales of petroleum and other
lubricants, and professional services. In 1990, the tax on
services (ISS) generated 60 per cent of the municipal tax revenue
in the metropolitan region; the taxes on land and property a
further 19 per cent (EMPLASA, 1992). The other significant source
of revenue in the past has been foreign loans, a fact reflected
in the current cost of interest payments, which absorbed 6 per
cent of the budget in 1990 (EMPLASA, 1992).

Municipal expenditures have been growing fast in the area of
public works and falling in the social sectors. This has been
particularly marked since the beginning of abertura, when
political attention focused on transport subsidies and on the
maintainance and renovation of roads. Whereas the budget for
education, health, and housing fell by US$600 million between
1993 and 1994, the cost of building a tunnel under the River
Pinheiros raised the road budget by 185 millions. The latter
project is likely to cost the municipality of São Paulo US$3
billion over the next few years and a major question must be
asked about the social benefits to be derived from this scheme.

Between 1970 and 1980, 4.6 million people were added to the
metropolitan population, 2.3 million of them as migrants. During
the same period, the population of Rio de Janeiro increased by
"only" 2.1 million people and the number of migrants
into the whole of Amazonia totalled only 2 million. Seventeen per
cent of all migrants in the country - 40 per cent of all the
migrants who moved to the nine metropolitan regions - moved to
São Paulo.

Fortunately, the pace of growth slowed during the 1980s and
the forecast of 19 million inhabitants by 1990 was well wide of
the mark. A halving of the annual growth rate of some 250,000
people per annum meant that the city had only 15.2 million
inhabitants in 1991. Annual growth in the 1980s had averaged 1.9
per cent compared to 4.5 per cent in the 1970s.

One reason for this slowing in growth is the dramatic fall in
fertility in the country. In the early 1950s, the average woman
bore 6.2 children in her lifetime, in the early 1980s only 3.5.
Brazil's population growth rate fell from 3.7 per cent per annum
in the 1970s to 1.9 per cent during the 1980s. A further reason
for the marked slowing in São Paulo's population increase is the
changing pattern of migration. During the 1980s, there was an
important reversal in the long-term trend, the metropolitan area
suffering a net loss in the numbers of people moving into and out
of the city (Perillo and Aranha, 1992). In the 1970s, the
metropolitan area gained 2.3 million people through migration;
between 1980 and 1991, it lost 430,000.3 By contrast, net
migration to the rest of the state increased by 838,000 in the
1980s compared to 751,000 in the 1970s. People have turned their
backs on the city of São Paulo.

The change can be explained by the decentralization of
manufacturing and service activity to areas beyond the
metropolitan region. This trend is very worrying at a time of
increasing social needs, because it promises to cut the tax
revenues of the city authorities. Local government can no longer
rely on the federal budget, which is likely to decline in real
terms, nor on foreign loans. The difficulties of providing
infrastructure in the 1970s were addressed with the help of loans
from the World Bank and the Inter-American Bank, but this option
is much less open to the authorities today. A critical issue
today, therefore, is how to provide infrastructure and services
to satisfy the ever-increasing demands of both industrial and
residential users in an environment of declining resources. The
prospects for social spending do not look good.

Even if the authorities are helped by the slower rate of
demographic growth, the city's population will continue to grow.
It will take an enormous effort to address the needs of these
additional people as well as those of the people who were
neglected during the lost decade of the 1980s. Such an effort
will be helped if the economy begins to grow once again, but,
even if it does, one major policy change is vital: more tax
resources must be shifted from the State of São Paulo and from
the nation to the municipal authorities. Without larger fiscal
transfers the prospects for the city look bleak.